SEC Division of Investment Management staff letter: Franklin Management, Inc.

RESPONSE OF THE OFFICE OF CIllEF COUNSEL
DIVISION OF INVESTMENT MANAGEMENT
PUBLIC
December 10, 1998
Our Ref No. 98-11-CC
Franklin Management, Inc.
File No. 801-13802
Your letter of December 7, 1998 seeks assurance that the staff would not recommend enforcement action to the Commission under Section 206(4) of the Investment Advisers Act of 1940 (the"Advisers Act") and Rule 206(4)-l(a)(2) thereunder if, as described more fully below, Franklin Management, Inc. ("Franklin"), a registered investment adviser, distributes to existing and prospective advisory clients a quarterly report which identifies and discusses some, but not all, of the specific securities bought, sold, or held by the adviser for investment advisory accounts. Fninklin Management, Inc. ("Franklin") is an investment adviser registered under the Advisers Act. You represent that Franklin provides investment~Q,.vice and management services to individuals, institutions and non-profit organizations (the "advisory clients"). Each of the advisory client accounts managed by Franklin (the "managed accounts") typically falls within a specific investment category (e~g.• growth, fIXed-income) that reflects the advisory client's investment objectives. Currently, Franklin prepares a quarterly report for each separate investment category that discusses recent market developments and the adviser's market outlook (the "Reports"). Franklin sends these Reports to'existing advisory clients with managed accounts, and to prospective advisory clients. Franklin proposes to include in th~ Reports information about some of the specific portfolio management decisions made during the preceding quarter, and some of the reasons for those decisions. Specifically, Franklin wants to identify and discuss specific securities that were bought, sold, or held for managed accounts within an investment category, some of the reasons for the management decisions affecting managed accOunts in a specific category, or a brief analysis of the issuer of the security. You believe that this information could be useful to existing and prospective clients because·it coUld help them to better understand the adviser's actions, and the reasons underlying the adviser's investment decisions. You also state that some existing .and prospective clients specifically have requested that this type of information be included in the Reports. You represent that Franklin will use objective, non-performance based criteria to select the securities that it will list and discuss in a Report. For example, Franklin might select securities based upon the largest dollar amount of purchases or sales of securities made for managed accounts in a category, the largest positions held during the quarter by managed accounts in a category, or some other objective criteria. You represent that Franklin will use the same selection criteria for each quarter for a particular investment category. You also represent that the Reports will not discuss, directly or indirectly, the amount of any profits or losses, realized or unrealized, of any of the specific securities. You represent that each Report will contain disclosure that
generally states that the specific securities identified and described Effective November 4, 2022, This Letter is Withdrawn. Please consult the following web page for more information: https:// www.sec.gov/divisions/investment/im-modified-withdrawn-staff￾statements